Bank Debt Restructuring

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Are you struggling with debt?

Bank Debt Restructuring

Restructure it. Resolve your crisis

The state of the world and its economic challenges are creating and increasing financial stress for millions of people. Although a lot is being done by various authorities to support and protect vulnerable individuals, drastic changes in income and circumstances are seeing ongoing struggles everywhere, and the UAE is no exception.

Personal debt is on the rise, but what many people don’t realise is that debt will multiply rapidly and continue to rise, if it is left unpaid. Debt is more dangerous than any loan, and it will grow much faster if you are only paying off the minimum dues or not paying anything at all.

What should you do if you have unpaid dues on your credit card?
Are you finding it difficult to make payments on your home or car loans?
Whom do you turn to when you have not received your salary?
What kind of assistance can you expect when your debt is rising?
How can you rebalance your finances – and balance your life?

Communicating with your bank

One of your first steps should be to open a formal channel of communication with your bank. Ask to speak or attempt to meet with decision-making authorities, and maintain regular contact with them. Most UAE banks continue to show great leniency to their customers in difficult times. More importantly, keeping them informed will demonstrate that you are willing to take up responsibility for your financial obligations.

Ask your bank for a debt restructuring. Consolidating multiple loans into a new facility – with a longer tenure and lower interest rates – will allow you to manage your debt and your finances more effectively.

You will need to provide evidence of your financial adversity to request for a postponement of repayments, or get enrolled in the TESS programme. (The Central Bank of the UAE’s Targeted Economic Support Scheme helps banks provide temporary relief to individuals affected by the Covid-19 pandemic, and facilitates additional lending capacity through the relief of existing capital and liquidity buffers.)

Contacting other banks

If you are unable to make progress with your own bank, start contacting other banks based in the UAE. They may be willing to take on all your debts if you move your salary to them. They may also give you a better rate or a longer tenure for the repayment of your loans.

Being employed, even if it is with reduced pay, will work greatly in your favour. Alternatively, share documentary evidence of your delayed or reduced salary to strengthen your request. In your communications, make it clear that you are committed to clearing your debts.

Asking for intervention

In the rare event that your bank and other banks remain unresponsive to all your attempts at renegotiation, you can write to the Consumer Protection Department at the UAE Ministry of Economy, who will intervene on your behalf.

The Department of Economic Development (DED) in each emirate also deals with consumer rights issues.

Applying for insolvency

The UAE’s Personal Insolvency Law allows you to apply for a court-mediated settlement of your debts if you are unable to do so yourself. The Federal Decree Law No. 19 of 2019 on Insolvency addresses two key routes and procedures: the first relates to a request for court assistance to settle your debts, and the second relates to liquidation proceedings if the debts are not cleared after an extended period of time.

Your application must be accompanied by extensive documentation, including a list of all your personal assets.

Claiming unpaid salary

Your debt is your responsibility, and your employer is not liable for any increase in your debt levels. However if your salary has not been paid or has been delayed unreasonably – especially if this is the major cause of your financial distress – you can take recourse in the law.

Non-payment of salary by an employer is a violation of Article 56 of the UAE Employment Law, which states, “Employees engaged on yearly or monthly remuneration shall be paid remuneration at least once a month; all other workers shall be paid at least once every two weeks.” Further, Article 1(B) of Ministerial Decree No. 739 of 2016, states, “The employer shall be deemed late in paying unless he pays the salary within the first 10 days as of
maturity date, and shall be deemed as refusing to pay the salary unless he pays it within one month as of the maturity date, unless a less term is set/provided in the contract.”

If you are unable to resolve the issue directly with your employer, you may file a complaint with the Ministry of Human Resources and Emiratisation (MoHRE), or if you are in a free zone, directly with the free zone authority. Teaming up with your colleagues and raising a dispute collectively will add pressure on the employer to release your salaries.

If the dispute cannot be resolved, filing a case at the UAE Labour Court will help you negotiate better and secure your rightful dues sooner.

Reducing financial burden

If your loan repayments are becoming a considerable financial burden, you should look at liquidating some of your assets. Your savings can also help you repay and clear your outstanding debt.

Enlist the support of your family. Be honest with them about the financial pressures you are facing. Find ways for responsible members to share some of your financial responsibilities, be it through part-time work or home-based businesses.

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